Letter from... Ireland

Siobhan Creaton with the latest from the Emerald Isle

If accountancy regulation for insurance was leaving the industry punch-drunk from a barrage of legislative proposals a year ago, 2004 saw the situation continuing, and now the outlook for 2005 and onwards looks like more of the same.

An insider trading courtroom drama that has turned many captains of industry into reluctant stars is gripping Ireland's business world.

Fyffes, a publicly quoted importer of bananas and other fruits, took the case against the industrial holding company known as DCC, and its chief executive and deputy chairman, Jim Flavin. Fyffes claims that DCC and Flavin breached the 'insider dealing' law when the company sold 106m euros worth of Fyffes stock in 2000. The shares were sold to investors six weeks before Fyffes issued a profit warning that knocked 25% off the share price. DCC and Flavin, who was a director of Fyffes at the time, deny the claim.

The central characters are Carl and David McCann, the sons of Neil McCann, a businessman now in his seventies who built-up Fyffes. Their father is retired and they are Fyffes' chairman and chief executive respectively.

Jim Flavin was their father's long-time business associate who had founded DCC, a vehicle that invested in a range of companies. Over the years, DCC put money into Fyffes and amassed a stake in the fruit importer that was eventually almost equal in size to that held by the McCanns.

During the first 25 days of the trial Carl and David McCann volunteered details of their uneasy relationship with Flavin, whom they found to be moody and overbearing. At one point Carl said he was aware that Flavin regarded the legal proceedings as 'personal' but said it was neither personal nor pleasant. It was no fun for him to be sitting in court, he assured everyone.

It's no fun for Flavin either. His reputation is being challenged and if Fyffes' claims are upheld DCC could forfeit the 85m euros profit it pocketed from the share sales. To add to its woes, the Irish Revenue Commissioners are keeping an eye on the proceedings. It is interested in ascertaining who controlled the offshore subsidiary company, set up to avoid paying capital gains tax on the sale proceeds, through which DCC claims the Fyffes shares were held.

The key elements to be determined by Justice Mary Laffoy are whether the confidential information concerning Fyffes' trading problems, which were known to Flavin in February 2000, was price-sensitive information. He claims it wasn't.

DCC has drawn the court's attention to the fact that it sold the Fyffes shares at a time when they were at a record high and were attracting unprecedented interest from investors. February 2000 was the height of the internet boom and the skyrocketing of the Fyffes share price to almost 4 euros was largely on the back of its worldoffruit.com project rather than its trading prospects, it claims. When the profits warning was announced Fyffes shares fell from 3.90 to 2.60 euros. Six months later, when the internet bubble burst, Fyffes shares crashed to 68 cents and have never returned to February 2000's heady levels.

The other issue to be determined is whether Flavin dealt in the Fyffes shares on that date. DCC says it received an unsolicited bid for its Fyffes stake and passed it on to its subsidiary company that executed the sale. Details of a conversation between Flavin and a stockbroker, recorded on the day the first tranche of shares were sold, have been played in court.

Over the coming weeks and months reclusive stockbrokers and some of Ireland's leading business figures who were directors of Fyffes and DCC will make cameo appearances in the High Court. Experts will be lined up to give their opinions and the Irish Stock Exchange will explain its handling of this thorny issue. The Banana Monologues plays daily to packed audiences at Dublin's High Court. It seems set to run and run.

Siobhán Creaton is Finance Correspondent of The Irish Times.